PHADA's position
on the FY '05 HUD budget

The following is taken from the President's Forum (February 25 edition of the Advocate newsletter) written by PHADA President Rick Parker of Athens, GA.

Public Housing
PHADA began reporting some of the major details of HUD's FY 2005 budget proposal in the last edition of the Advocate. In the meantime, we've tried to keep you up-to-date through subsequent reports on our website. Now that we have had time to review the budget in depth and discuss it amongst the association's elected leadership, this edition will share even more thorough information.

Unfortunately, the pattern of a declining federal commitment to public and assisted housing continues. Only twice in the last ten years have PHAs received full funding of operating subsidies. The trend was magnified in FY 2003 when the administration proposed, and much to our disappointment attained, the abolition of the Public Housing Drug Elimination Program. Similarly, HUD proposed the elimination of HOPE VI this past year. Congress rejected that bid, funding the program at a significantly reduced level of $150 million, down from almost $600 million.

For FY 2005, the administration proposes $3.57 billion for the Operating Fund and $2.67 billion for the Capital Fund. Once again, it appears that the budget for both these accounts is insufficient to meet existing demands. PHADA and other industry groups estimate that roughly $3.8 billion is required for operating needs, meaning HAs would be funded at about 93-94 percent of full eligibility for the second consecutive year. The loss of PHDEP and HUD's recent decision denying any utility adjustments has exacerbated the shortfall for many HAs.

These cumulative reductions are forcing many HAs to lay off staff and scale back resident services. The problem was clearly illustrated in the February 11 Advocate, which described how the New York City HA will be forced to eliminate almost 1,000 positions over the next two years. The same kinds of things are happening all across the country, albeit on a proportionately smaller, but no less significant scale. My own organization was forced to take similar actions this year.

The situation regarding the Capital Fund is equally troublesome. The administration is basically proposing to maintain funding at current levels. While this is a marked improvement compared to previous years under former HUD Secretary Martinez, more resources are still needed to keep pace with ongoing modernization needs. The proposed 2005 budget also fails to help HAs address their backlog of unmet capital needs, which has been independently documented to exceed $20 billion nationwide. When are we going to begin addressing this problem?

There is a new fifty-HA demonstration program in the budget called the "Freedom to House" proposal. Briefly, it is similar to the six-year-old Moving to Work (MTW) experiment, which gives HAs flexibility to merge their funds and set their own admissions, rent-setting and other major policies. MTW is a known entity and anecdotal reports are that it has produced some successful results to date. One of its drawbacks is the often time-consuming application/waiver process. While the objective behind the new "freedom" plan is laudable and we generally support initiatives designed to give HAs more flexibility, perhaps it might be more prudent to extend and broaden the MTW initiative to more HAs under an expedited implementation process.

Once again, the administration is proposing to terminate HOPE VI. Since President Bush recently signed bipartisan legislation to reauthorize the program for another two years we will, again, oppose such a move.

In sum, the proposed public housing budget will impose difficult financial constraints on HAs risking a corresponding decline in the quality of life for our residents. The bottom line is that HAs cannot continue to fulfill their mission under the "death by a thousand cuts" approach contained in past budgets and continued in this latest proposal. PHADA will make our views known to Congress and work vigorously to ensure adequate funding in the fiscal year that begins October 1.

The Voucher Plan
There has been a lot of focus on the administration's plan to recast the Section 8 Housing Choice Voucher (HCV) program. Again, readers can refer to more specifics elsewhere in this publication. For the purposes of this particular discussion, there are two major issues that must be considered when reviewing the HCV proposal. They concern the "2 Fs," if you will - funding and flexibility.

PHADA has serious concerns regarding the funding side of the voucher proposal. The proposed budget would cut about $1 billion from the current HCV allocation. Working with other organizations, we have done an analysis indicating that the shortfall could lead to more than 200,000 families losing housing assistance. This is unacceptable.

Responding to the issue of funding, HUD has suggested that considerable savings could accrue as a result of the statutory and regulatory flexibility included in the proposal. While that might prove true in the long run (assuming the plan clears congressional hurdles), the timing of such savings is questionable. Due to existing structures and commitments and the time needed for a transition, it is unclear whether flexibility would produce significant savings early enough to make a difference in FY 2005.

We are also deeply concerned about, and opposed to, the funding proposed for the administration of the HCV program. Under the budget, HAs would receive 7 percent of their total allocation. This is a radical departure from the existing system, which more equitably distributes administrative funds based on actual units leased. There is, in fact, a cost associated with the administration of each unit completely independent of the amount of the housing assistance payment. In contrast, preliminary analysis of HUD's proposal indicates major administrative cuts for most HAs, crippling their ability to provide services to their clientele. Since the administrative fee would be based on a percentage of the total of housing assistance payments, the proposed plan would be particularly damaging to many suburban and rural communities that operate smaller programs.

In fairness, there are also some positive elements in the proposal. PHADA and others in the industry have long advocated moving away from a "one size fits all" system to allow for local flexibility in the administration of the public and assisted housing programs. This proposal would provide that kind of latitude in a number of important ways. Among other things, for example, fewer inspections and less frequent recertifications would be required. In addition, HAs would be able to set rents based on local considerations under broad federal guidelines. We believe the HCV program could be revised to provide maximum flexibility while still ensuring that low-income families continue to receive needed assistance and that equitable affordability standards remain in place. These ideas certainly warrant further consideration and discussion with the Department, Congress, and others.

With this in mind, we will engage in a dialogue with the Department and others to try and improve the proposal. At the same time, we will make it clear that there is no substitute for adequate funding to ensure that current voucher-holders can be assisted.

PHADA FRONT